$13,350,000 for the Acquisition of an Apartment Building, Sized to 6.50% Stabilized Debt Yield; Los Angeles, CA

Rate: 1-Month LIBOR + 4.75%
Term: 3 Years
Amortization: Interest Only
Prepayment Penalty: 18 Months Minimum Interest
LTC: 77%
Stabilized DY: 6.5%
Fees: 1% in/1% out (waived if refinanced with current lender)
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $13,350,000 of bridge financing for the acquisition and renovation of a an apartment building in West Los Angeles. The building, which was constructed in 1969, is in need of a major renovation. The financing provided 77% of the acquisition and renovation cost. The Sponsor intends to complete an extensive renovation to the exterior and common areas. At acquisition the building was 60% occupied, so the Sponsor will immediately improve the vacant units and rent at market. The loan was sized to a 6.50% stabilized debt yield, which equated to 77% of total project cost. The non-recourse financing has a floating interest rate of LIBOR + 4.75% and has a 3-year term.

Advisors

Related Financings

  • Expand

    $13,000,000 Acquisition and Reposition Financing on a 47-Unit Student Housing Property; Adjacent to a Major Southern California University

    May 27, 2020

    Transaction Description:

    George Smith Partners arranged the $13,000,000 first mortgage on a 1960’s vintage, 102-bed student housing property in Los Angeles. The national balance sheet lender provided the Sponsor non-recourse financing at 70% of total project cost including 100% of future CapEx funds totaling $42,500/per unit to complete extensive interior and exterior renovations. Interest expense is not incurred on CapEx funds until drawn. The Sponsor’s cash flow was maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.35% coupon required interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to a lack of cash flow for 12 months, the Capital Provider structured an interest reserve to cover debt service during the peak reposition period.

    Rate: 30-Day LIBOR + 3.35%
    Term: Three years plus two 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Cost: 70%
    Prepayment: 21-month minimum interest period
    Guaranty: Non-recourse
    Lender Fee: 1.00%

  • Expand

    $16,300,000 Permanent Multifamily Financing, Seven Years IO, 65% LTV; Boise, ID

    May 27, 2020

    Transaction Description:

    George Smith Partners placed $16,300,000 in cash out refinancing for a recently stabilized for-rent SFR development. The financing includes seven years of interest only, which will maximize cash flow for an asset located in one of the fastest growing markets in the United States. The Project is a key asset for the Sponsorship group which operates over 2,500 units throughout the mountain states and securing a low rate, higher leverage, take-out loan was an essential part of the long-term strategy of the company. GSP utilized our relationships to close the transaction in three weeks from a signed application.

    During the COVID-19 era we have seen significant changes to underwriting standards in comparison to 2019. These new requirements presented an underwriting challenge for the recently stabilized project as collections were increasing throughout 2020. GSP was able to demonstrate the Sponsors overall portfolio performance and three months stabilized occupancy to achieve maximum proceeds.

    Rate: 3.20%
    Term: 10 Year
    Interest Only: 7 years
    Amortization: 30 years
    Guaranty: Non-Recourse

  • Expand

    $1,690,000 Freddie Mac Multifamily loan; Killeen, TX

    May 20, 2020

    Transaction Description:
    George Smith Partners secured $1,690,000 in Freddie Mac permanent financing for the acquisition of a stabilized 72-unit multifamily property located in Killeen, Texas. The Property is located four miles southeast of Fort Hood, the largest active-duty armored post in the U.S. military, occupying more than 218,000 acres of land in Bell and Coryell Counties.

    Challenges:
    As GSP went into application, the world was entering into the COVID-19 pandemic. Most lenders had either stopped lending or become much more cautious. Most agency lenders require Borrowers to have a track record with multiple projects before they will be considered for a Freddie Mac or Fannie Mae loan. In this case, the Sponosr was a first-time agency borrower. To make it even more challenging, the Property was in a small market with a high concentration of military personnel and the Sponsor required the ability to have prepayment flexibility.

    Solution:
    GSP used its relationship with a capital provider who closed multiple loans with our firm. GSP recently closed a loan in a similar small market and we were confident that they would understand the demographics and market characteristics. For this type of financing, the Lender’s typical structure is to offer a 10-year term with Yield Maintenance. Thanks to GSP’s long-standing relationship with this Lender, we were able to secure an attractive rate, high leverage, and a step-down prepayment of 3,1,0,0,0 on a 5-year term. The new capital allows the Sponsor to expand their Texas Multi-Family portfolio.

    Rate: 4.59%
    Term: 5 Years
    Amortization: 30 Years
    Prepayment: 3%, 1%, 0%

  • Expand

    $21,700,000 Construction-to-Perm Loan for Self-Storage Project; Santa Clarita Valley, CA

    May 20, 2020

    Transaction Description:
    George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.

    Challenges:
    The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.

    Solutions:
    GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.

    Rate: 4.75% Fixed
    Term: 1 + 5 (12 Months Construction, then 5 Years Perm)
    Amortization: 3 Years I/O then 30 Years Amortization
    LTC: 80%
    Guaranty: Completion Guarantee

  • Expand

    $1,400,000 of Permanent Financing for 5-Unit Apartment Building; Silver Lake, CA

    May 13, 2020

    Overview:

    George Smith Partners secured $1,400,000 to refinance a stabilized multifamily building in Silver Lake, CA. The Property, which was built by the Sponsor in 1991, is 100% occupied. The Sponsor has owned and managed the building for over 25 years, but this is currently the only asset in his portfolio. Refinancing provided the ability to achieve a lower interest rate and return equity to increase his liquidity position. The non-recourse financing carries a fixed interest rate of 4.05% for 5 years.

    Challenges:

    The Sponsor’s lack of real estate experience and non-third-party property management deterred some capital providers from offering non-recourse financing. The Sponsor also had limited pre-closing liquidity which made it difficult to qualify for the most attractive rates. Lastly, the eventual lender required a 6-month interest reserve due to recent uncertainty surrounding the multifamily market.

    Solution:

    Even though the Sponsor has limited real estate exposure, GSP was able to highlight the strong historical occupancy that the Sponsor has been able to maintain while self-managing the subject property for over two decades. GSP identified a lender that only required liquidity equal to 5% of the loan amount to qualify for their non-recourse program. The interest reserve was structured as pre-paid interest that goes directly to pay the first six months of principal and interest payments. This avoids having a held-back reserve that would only release upon hitting certain covenants in the future.

    Rate: 4.05% Fixed
    Term: 5 Years
    Amortization: 30 Years
    LTV: 62%
    DSCR: 1.15x
    Recourse: Non-Recourse
    Prepayment: 1.75% for Years 1-3, 1.00% for Years 4-5
    Loan Fee: Par

  • Expand

    $18,000,000 Non-Recourse Financing for the Recapitalization of a Six Property Retail Portfolio; San Francisco and Los Angeles, CA

    May 13, 2020

    Transaction Description:

    George Smith Partners successfully arranged $18,000,000 in non-recourse financing for a six-property portfolio that includes trophy street-front retail in urban infill locations within the primary submarkets of San Francisco and Los Angeles. The mix of tenants include national investment-grade companies, and quality national, regional and local companies. The assets are strategically located in submarkets with high barriers to entry, strong demand drivers, and quality demographics.

    GSP’s extensive lender relationships allowed for a competitive marketing process to create the desired structure to meet the Sponsors current and future growth objectives. GSP created a flexible structure that allowed the Sponsor to acquire new properties to meet their growth objectives. The Capital Partner structured the financing at a 65% loan to value on a non-recourse basis across the assets, with favorable release and acquisition provisions. Exact terms are confidential. The three-year initial loan term is interest only and priced at 280 bps over Libor with two, one-year extension options.

    Rate: 30-Day LIBOR + 2.80%
    Term: Three years plus two 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Value: 65%
    Prepayment: 18-month minimum interest period
    Guaranty: Non-recourse
    Lender Fee: 1.00%

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here